China continues its steady progression in the rankings, rising by one
rank to 26th. Indeed, it has improved its score and rank each year since 2005.
The worlds most populous country continues to lead the BRICS economies by a significant margin, with South Africasecond among the BRICSplacing 50th. 24 Chinas performance improves in most pillars of the GCI and is stable in the remaining ones. As in previous years, its macroeconomic situation is again very favorable (10th), despite a prolonged episode of high inflation. China is one of the worlds least indebted countries, boasts a savings rate of some 53 percent of GDP, and runs only moderate budget deficits. These factors, combined with good economic prospects, contribute to an improvement of the quality of its sovereign debt far greater than that of the other BRICS. China also achieves relatively high standards in terms of health and basic education (32nd), with positive trends in health indicators and nearly universal access to primary education, which is well assessed in terms of quality. Turning to the more sophisticated areas of competitiveness, China ranks high in business sophistication (37th) and innovation (29th), particularly when considering its level of development. On a less positive note, a number of challenges persist in the areas of corruption and judicial independence within the institutions pillar (48th). Moreover, the sentiment among businesses is that the country has become less safe over the past three years, resulting in higher costs for protection against diverse forms of crime and violence. Finally, standards of business ethics (57th) and corporate accountability (66th) are below those found in a number of other economies. As in previous years, Chinas fairly poor results in the financial market development and technological readiness pillars pull down the economys overall competitiveness performance. However, the country improves markedly in the first of these (48th, up nine spots), thanks to an increased availability and affordability of financial services and better access to credit. It also makes strides in the technological readiness pillar (77th, up one), largely because of double-digit growth in the penetration rates of Internet use and mobile telephony.
Indonesia drops two places this year to
46th, following an impressive improvement of 11 places over the past two years. Indonesia remains one of the best-performing countries within the developing Asia region, behind Malaysia and China yet ahead of India, Vietnam, and the Philippines. The macroeconomic environment (23rd, up 12 places) continues to improve despite rising fears of inflation. Sound fiscal management has brought the budget deficit and public debt down to very low levels, attributes that contribute to further upgrading the countrys credit rating and to raising the countrys ranking on the macroeconomic environment pillar to 23rd this year (up from 89th in 2007). The situation is also improving, albeit from a much lower base, in the area of
physical infrastructure (76th, up six places), yet the quality of port facilities remains alarming and shows no sign of progress (103rd, down seven places, with a score of 3.6) and the electricity supply continues to be unreliable and scarce (98th). The assessment of public institutions continues to deteriorate, with a 10-place drop in the related pillar (71st), even though Indonesia does relatively well on selected components. Despite efforts to tackle the issue, corruption and bribery remain pervasive and are singled out by business executives as the most problematic factor for doing business in the country. Security, or the lack thereof, is again becoming a concern, and the business community assessed this indicator at levels similar to those seen in 2005 (91st). Because it is now close to entering the efficiency-driven stage of development, according to the GCI classification, Indonesias competitiveness increasingly depends on more complex elements, such as market efficiency. Addressing the many rigidities (120th) and inefficiencies of the labor market (94th) would ensure a more efficient allocation of labor. Additional productivity gains could be reaped by boosting technological readiness (94th), which remains very low, with slow and scant adoption of ICT by businesses and the population at large.
South Africa moves up by four places to attain
50th position this year, remaining the highest-ranked country in sub-Saharan Africa and the second-placed among the BRICS economies. The country benefits from the large size of its economy, particularly by regional standards (it is ranked 25th in the market size pillar). It also does well on measures of the quality of institutions and factor allocation, such as intellectual property protection (30th), property rights (30th), the accountability of its private institutions (3rd), and its goods market efficiency (32nd). Particularly impressive is the countrys financial market development (4th), indicating high confidence in South Africas financial markets at a time when trust is returning only slowly in many other parts of the world. South Africa also does reasonably well in more complex areas such as business sophistication (38th) and innovation (41st), benefiting from good scientific research institutions (30th) and strong collaboration between universities and the business sector in innovation (26th). These combined attributes make South Africa the most competitive economy in the region. However, in order to further enhance its competitiveness the country will need to address some weaknesses. SouthAfrica ranks 95th in labor market efficiency, with rigid hiring and firing practices (139th), a lack of flexibility in wage determination by companies (138th), and significant tensions in labor-employer relations (138th). Efforts must also be made to increase the university enrollment rate of only 15 percent, which places the country 97th overall, in order to better develop its innovation potential. In addition, South Africas infrastructure, although good by regional standards, requires upgrading (62nd). The poor security situation remains another important obstacle to doing business in South Africa. The business costs of crime and violence (136th) and the sense that the police are unable to provide protection from crime (95th) do not contribute to an environment that fosters competitiveness. Another major concern remains the health of the workforce, which is ranked 129th out of 142 economiesthe result of high rates of communicable diseases and poor health indicators more generally.
Brazil improves five places to rank
53rd overall. The country benefits from several competitive strengths, including one of the worlds largest internal markets (10th) and a sophisticated business environment (31st), thus allowing for important economies of scale and scope. Moreover, the country has one of the most efficient financial markets (40th) and one of the highest rates of technological adoption (47th) and innovation (44th) in the region. On a less positive note, Brazil still suffers from weaknesses that hinder its capacity to fulfill its tremendous competitive potential. The lagging quality of its
overall infrastructure (104th) despite its Growth Acceleration Programme (PAC), its macroeconomic imbalances (115th), the poor overall quality of its educational system (115th), the rigidities in its labor market (121st), and insufficient progress to boost competition (132nd) are areas of increasing concern.
India ranks 56th in this years assessment. The country drops five places and demonstrates only minor changes in its competitiveness performance since last year.25 Among the BRICS,
India continues to rank on a par with South Africa (50th) and Brazil (53rd) and ahead of Russia (66th), but its gap with China is widen-ing: the score difference between the two economies has increased sixfold between 2006 and today, the gap expanding from less than 0.1 to 0.6 points. India continues to be penalized for its mediocre accomplishments in the areas considered to be the basic factors underpinning competitiveness. The countrys supply of transport, ICT, and
energy infrastructure remains largely insufficient and ill-adapted to the needs business (89th). Indeed, the Indian business community continues to cite infrastructure as the single biggest hindrance to doing business in the country. It must be noted, however, that the situation has been slowly improving since 2006, although this does not translate into a higher ranking because other countries have been improving faster. The picture is similar in the health and basic education pillar (101st). Despite improvements across the board over the past few years, public health and education quality remain a prime cause of concern. While we observe some encouraging trends in these two areas, the same cannot be said of the countrys institutions and macroeconomic environment, the other two dimensions comprising the basic requirements component of the GCI. In the past five years, discontent in the business community about the lack of reforms and the apparent inability of the government to provide a more conducive environment for business has been growing.
Corruption (99th) and burdensome regulation (96th) certainly fuel this discontent. Since 2006, Indias score in the institutions pillar has plunged from 4.5 to 3.8. Once ranked a satisfactory 37th in this dimension, India now ranks 69th, having dropped 11 places this year alone. Meanwhile, the macroeconomic environment (105th) continues to be characterized by large and repeated public deficits and the highest debt-to-GDP ratio among the BRICS. More recently, the stability of the countrys macroeconomic environment is being undermined by high inflation, near or above 10 percent. As a result, India has been hovering around the 100 mark in this pillar for the past five years. Despite these considerable challenges, India does possess a number of remarkable strengths in the more advanced and complex drivers of competitiveness. This reversed pattern of development is characteristic of India. The country boasts a vast domestic market that allows for economies of scale and attracts investors. It can rely on a well-developed and sophisticated financial market (21st) that can channel financial resources to good use, and it boasts reasonably sophisticated (43rd) and innovative (38th) businesses.
With one of the highest improvements in the regional rankings, moving up eight spots,
Mexico occupies 58th position this year. The countrys efforts to boost competitionalthough it remains an important weakness (103rd)and its regulatory improvements that facilitate entrepreneurial dynamism by reducing the number of procedures (34th) and the time (35th) required to start a business seem to be paying off, contributing to an improvement of the overall business environment. This development, coupled with the countrys traditional competitive strengths such as its large internal market size (12th), fairly good transport infrastructure (47th), sound macroeconomic policies (39th), and strong levels of technological adoption (58th) have led Mexico to improve its competitive edge. However, the country still suffers from important weaknesses that are holding back its capacity to further enhance competitiveness. Not much progress has been made in addressing the flaws in the public institutional framework (109th). Despite many efforts to fight organized crime, security concerns still exact a high price from the business community (139th). Adopting and implementing policies to boost domestic competition (107th), especially in strategic sectors such as ICT, energy, and retailing, along with additional reforms to render the labor market more efficient (114th) are still needed to increase the efficiency of the Mexican economy. Moreover, as the country continues to grow and move toward a higher stage of development and production costs rise, sustainable growth and higher wages will increasingly call for further reforms and investment to improve the educational and innovation systems. The current overall poor quality of the educational system (107th), insufficient company spending in R&D (79th), and limited innovation capacity (76th) can jeopardize the future ability of the country to compete internationally in higher-value-added sectors.
Turkey moves up by two places this year to
59th position. The country benefits from its large market (17th), which is characterized by intense local competition (13th). Turkey also benefits from its
reasonably developed infrastructure (51st), particularly roads and air transport, although ports and the electricity supply require upgrading. In order to further enhance its competitiveness, Turkey must focus on improving its human resources base through better primary education and healthcare (75th) and higher education and training (74th), increasing the efficiency of its labor market (133rd), and reinforcing the efficiency and transparency of its public institutions (86th).
The
Russian Federation drops three ranks to
66th position this year. The drop reflects the fact that an improvement in macroeconomic stability was outweighed by deterioration in other areas, notably the quality institutions, labor market efficiency, business sophistication, and innovation. The lack of progress with respect to the institutional framework is of particular concern, as this area is likely to be among the most significant constraints to Russias competitiveness. Strengthening the rule of law and the protection of property rights, improving the functioning of the judiciary, and raising security levels across the country would greatly benefit the economy and would provide for spillover effects into other areas. In addition to its weak institutional framework, Russias competitiveness remains negatively affected by the low efficiency of its goods market. Competition, both domestic as well as foreign, is stifled by market structures dominated by a few large firms, inefficient anti-monopoly policies, and restrictions on trade and foreign ownership. And despite many efforts, its financial markets remain unstable, with banks assessed very poorly (129th). Taken together, these challenges reduce the countrys ability to take advantage of some of its strengthsparticularly its
high innovation potential (38th for capacity for innovation), its large and growing market size (8th), and its solid performance in higher education and training (27th for the quantity of education).
Up five places ,
Pakistan (118th) partially bounces back from last years significant drop in rank. Yet, in several categories, it remains one the poorest performers of the developing Asia region, and indeed of the entire sample of economies. It is particularly worrisome that Pakistan earns its lowest marks, with no sign of improvement, in the most basic areas of competitiveness, namely institutions (107th),
infrastructure (115th), health and primary education (121st), and the macroeconomic environment (138th). In order to benefit from the scale advantages associated with its significant market size (30th), Pakistan will have to decrease regu-latory rigidities in the labor market (now ranked 136th) and reduce barriers to domestic and foreign competition in order to render the markets for goods and services more efficient (93rd). Last but not least, boosting the technological adoption of firms and the public at large would allow for considerable productivity increases in the country.
http://www3.weforum.org/docs/WEF_GCR_CountryProfilHighlights_2011-12.pdf